Volume selling, price-chopping, invoice-selling. No matter what term you use, it all burns down to one single ember: buy ‘em deep and sell ‘em cheap. Since the dawn of time, there have been dealers who’ve made their money the old-fashioned way: they’ve whored for it. And, to be honest, there is something seductively enticing about a business that sells so many bikes that it moves people through like cattle. It’s the siren’s soothing call of success that rings in a dealer’s ears. Unfortunately, in many cases, it’s only a perception of success. Underneath the shiny surface of that pool, my friends, lies a dark, blood-thick ocean that will suck you down to whatever monsters call the bottom home. Many would say it’s a good place for bottom-feeders, but before we get nasty, let’s discuss why a volume model isn’t a good strategy.
First off, for a small guy who is starting out, or even a medium-sized dealer who’s just trudging along, the thought of going to a volume format looks good. You see the guy who owns several brothels … uh, dealerships, driving around with his hot little girlfriend in a new Mercedes — strutting his stuff at the dealer show while your DSM is clinging to his side like a Siamese twin. He’s getting recognition; he’s getting perks; and you’re pretty certain that he’s in a top-floor suite. He’s moving product like a maniac and advertising $500 below net/net. His teeth were recently whitened enough to blind old ladies and, pretty soon, you find yourself wanting that “success.”
Sam Walton built a heck of an empire through volume selling. On the outside, it looks good. Become big enough and you can muscle the vendors — buy ‘em deep and get ’em cheap, right? Wrong. The first rule to remember regarding vehicle sales is that every man, (and dealership), is not only created equal but treated equally. No matter how big you are and how many bikes you sell, you’re still going to purchase them for the same price. A Rancher isn’t going to cost you less just because you sell more of them. You may reach a higher incentive tier with a bigger order. However, there is but one price list, my friend.
“So,” you may say to me, “I know how to do this. I’ll get a hot-shot F&I guy, train my parts and service people in the art of selling, and I’ll hire some former Playmates to dance around the showroom, scantily clad, and hock accessories for me! I’ll make it up on the back-end!”
Yes, well, that does sound like a plan. However (and I’ve been through this), in my experience, it doesn’t work — at least not well. You see, there was a time when my state was held hostage by a certain dealership (three locations), which advertised pretty much every unit around $500 below net/net. Yes, that would be invoice, minus incentives, minus holdback, minus $500 for no apparent reason whatsoever. District rep meetings were filled with the screams of dealers holding up ABC Cycle ads and yelling, “Do something!” at the tops of their lungs.
Well, I’m not much for sitting around and yelling, personally. I decided that I was going to compete. All I had to do was figure out how to make money volume selling, even though my own father had warned me about the dangers from day one. I did just what I described above (sans the scantily clad chicks — my wife put the brakes on that plan, dammit), and I went for it. I bought truckloads of machines and hired an F&I guy that I knew could sell bibles in the Playboy mansion. My parts guys were trained in sales techniques; my service guys pushed pre-paid maintenance. I even hired a big, burly guy with a gun to take the customer’s wife hostage if he didn’t buy at least $1,000 in accessories.
We sold like mad. My sales force promised the world, and my company made sure it delivered. We advertised in the mail, in the traders, on the radio, television, Internet, newspapers, billboards, vehicles and I think a barn-roof in Somalia — anywhere that people might see that we’d drop our pants for anyone. After all, the price of the bike meant nothing since we were going to make it up on the back end.
By the end of that year, we were 25th in the nation for retail sales with one vendor, and I think we topped the district for sales of brands we didn’t even carry. It was crazy. I went to the dealer meetings that year and reps hung onto my arms and carried me around on their shoulders; they bought me drinks and paid for my dinner. They called their mothers and asked me to talk to them to prove that their sons were in the presence of royalty. And that back end? Well, there was some penetration to a back end, all right — my back end, to be specific. With triple the annual sales volume, I’d managed to lose more money in that hectic year than in any year of any business I’ve owned combined.
The fact of the matter is this: Yes, we sold a ton of warranties. Yes, we sold a ton of pre-paid maintenance plans. Yes, we sold a ton of parts, accessories (would have been more with the hot chicks), oils, lubes, gear and you-name-it. The problems? We lost on unit sales. We overspent on advertising. We overspent on flooring interest and we overspent on overhead. We had control of absolutely nothing. With such a huge volume, our financial numbers fell behind. We had no current tracking and the more we sold, the more we spent. To handle that volume meant servicing customers; to service customers meant employing herds of people; to employ — well, you get the picture. Basically, I got the recognition, but I almost went broke doing it.
My point is that volume selling is easy if you’ve got the guts (or lack the common sense) to jump into it. And, there are some dealers who inevitably make it work, for a while, anyway. But, as with the rest of life, what’s “easy” is usually not what’s good for you. It’s easy to sit on the couch and eat Ding Dongs all day, but I wouldn’t recommend it. Remember, the siren’s song most always steers you toward the rocky shores.
So, are there pros to volume selling? I didn’t find them, but perhaps they exist. If you’re vain enough to live off of recognition rather than dollars, then sure. You’d just better have a substantial operating line of credit or find a way to sell ATVs out of a vending machine. If you try to do it with real overhead and real advertising, it’s likely to be a painful exercise that you’ll remember for a very long time.
